Small Business 401(k)
If you’re a small business owner, you might want to avail of the 401(k) plan. This is usually offered by financial institutions and although it comes in different names, the plans are the same.
The plan has many benefits but before you can enjoy it, you need to fulfill the requirements first.
Owners of small businesses these days are now opting for the 401(k) plan due to the changes in the EGTRRA (Economic Growth and Tax Relief Reconciliation Act) of 2001. The said plan is more flexible and beneficial as compared to retirement plans. Financial institutions refer to this plan in different ways and so if you want to avail one, you need to ask about the 401(k) plan. You should be aware that not all business entities are eligible. The plan is not only for sole proprietors but any small business may apply for it including partnerships and corporations; however, the eligible participant will only be the business owner.
Certain requirements should be met by the business owner. You can avail of the said plan even if you hire your spouse as an employee of the business. The plan components include salary deferral and profit sharing contribution. Small business owners are easily attracted to the high contribution limit. The 401(k) plan also offers benefits like loans. Your loan can amount to $50,000 or less depending on the balance of your plan. If you find limitations, you can always check the document. Discrimination testing is not performed. Another benefit is deducting contributions. You can deduct the plan contributions based on your eligible compensation. For the year 2009, the compensation is restricted to only $245,000.
Some business owners will not qualify if some of your employees are also eligible participants. You have sufficient compensation that can allow you to contribute $49,000 for the profit sharing contribution. If the business is incorporated, you will also be denied the 401(k) plan. You also need to ensure that the 401(k) plan is established on the tax year’s last day for the business. If you use the calendar year, then this means that by December 31, the 401(k) plan should already be established. There are also contribution deadlines that you need to take note as a participant.
A tax professional may be able to help you in determining if you’re an eligible participant in the 401(k) plan. You can offer the plan to your workers as well. If you have less than 100 employees, you can offer the Simple 401(k) plan or the savings incentive match plan. Before you sign up an employee, the salary should be around $5,000 annually but you can no longer offer a retirement plan. Regardless of the size of your business, you can offer the safe harbor 401(k) plan. However, as the employer, you will need to make a matching contribution.
- Franchise Opportunities
- Wholesale Business Opportunities
- Small Manufacturing Business
- Farming Business Ideas
- Unique Business Opportunities
- Shop Business Ideas
- Small Business Opportunities
- Startup Company Ideas
- Home Based Business Opportunity
- Rural Business Opportunities
- Tips for Buying and Selling
- Starting Rental Business
- Ideas for Small Business
- Free Business Ideas
- Internet Business Ideas
- Store Business Opportunities
- Entrepreneur Business Idea
- Retail Store Ideas
- Service Business Ideas
- Advice for Small Business
- Financing a Small Business
- Restaurant Business Opportunities
- Small Business Articles
- Business Marketing and Advertising
- Repair Business Opportunity
- Professional Career Opportunities
- Business Insurance Information
- Instructor Guides
1) Hardware (building materials which includes plumbing/electrical/steel )
2) Automobile spare parts ( 2/3/4 wheeler genuine/original/seconds quality)
3) Automobile accesories/dealership (OEM) parts.
Your response is highly appreciated.
Thanks & regards, Titus Suares